Question 1

If the central bank buys foreign assets,

Accepted Answer

A) the domestic monetary base will decline. 
B) domestic short-term interest rates will decline. 
C) the foreign-exchange value of the domestic currency will rise. 
D) its holdings of international reserves will rise. 
A) the domestic monetary base will decline. 
B) domestic short-term interest rates will decline. 
C) the foreign-exchange value of the domestic currency will rise. 
D) its holdings of international reserves will rise.

Question 2

Currently, the dominant reserve currency is the

Accepted Answer

A) U)S. dollar. 
B) Japanese yen. 
C) euro. 
D) British pound. 
A) U)S. dollar. 
B) Japanese yen. 
C) euro. 
D) British pound.

Question 3

The fixed exchange rates of the Bretton Woods system were maintained

Accepted Answer

A) by central bank interventions in the foreign-exchange market. 
B) by the requirement that short-term interest rates be equalized in all participating countries. 
C) by the requirement that long-term interest rates be equalized in all participating countries. 
D) through the automatic workings of the foreign-exchange market. 
A) by central bank interventions in the foreign-exchange market. 
B) by the requirement that short-term interest rates be equalized in all participating countries. 
C) by the requirement that long-term interest rates be equalized in all participating countries. 
D) through the automatic workings of the foreign-exchange market.

Question 4

If the U.S. current account balance is negative,

Accepted Answer

A) its financial account is likely to be positive. 
B) its financial account is likely to be negative 
C) it must use official settlements to balance its payments. 
D) its balance of payments cannot be zero 
A) its financial account is likely to be positive. 
B) its financial account is likely to be negative 
C) it must use official settlements to balance its payments. 
D) its balance of payments cannot be zero

Question 5

Capital inflow restrictions

Accepted Answer

A) receive less support from economists than full capital controls. 
B) may lessen domestic lending booms and risk-taking by domestic banks. 
C) were imposed in the United States during the late 1990s. 
D) were imposed in Europe in May 2000. 
A) receive less support from economists than full capital controls. 
B) may lessen domestic lending booms and risk-taking by domestic banks. 
C) were imposed in the United States during the late 1990s. 
D) were imposed in Europe in May 2000.

Question 6

The euro is

Accepted Answer

A) the currency of all nations in Europe. 
B) the rate at which the French central bank makes discount loans. 
C) a common currency of many European countries. 
D) the name of the European central bank. 
A) the currency of all nations in Europe. 
B) the rate at which the French central bank makes discount loans. 
C) a common currency of many European countries. 
D) the name of the European central bank.

Question 7

Which of the following is NOT considered a payment in the balance of payments?

Accepted Answer

A) capital outflows 
B) U)S. foreign aid to other countries 
C) imports of goods 
D) exports of services 
A) capital outflows 
B) U)S. foreign aid to other countries 
C) imports of goods 
D) exports of services

Question 8

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

Accepted Answer

A) Domestic interest rates will rise. 
B) The foreign-exchange value of the domestic currency will rise. 
C) The central bank will experience a decrease in international reserves. 
D) The domestic money supply will rise. 
A) Domestic interest rates will rise. 
B) The foreign-exchange value of the domestic currency will rise. 
C) The central bank will experience a decrease in international reserves. 
D) The domestic money supply will rise.

Question 9

If the Fed buys $2 billion of short-term securities issued by the government of Japan and pays for them by writing a check for $2 billion,

Accepted Answer

A) its assets will rise by $2 billion and its liabilities will fall by $2 billion. 
B) its assets will fall by $2 billion and its liabilities will rise by $2 billion. 
C) its assets and liabilities will both fall by $2 billion. 
D) its assets and liabilities will both rise by $2 billion. 
A) its assets will rise by $2 billion and its liabilities will fall by $2 billion. 
B) its assets will fall by $2 billion and its liabilities will rise by $2 billion. 
C) its assets and liabilities will both fall by $2 billion. 
D) its assets and liabilities will both rise by $2 billion.

Question 10

Which of the following is NOT considered a receipt in the balance of payments?

Accepted Answer

A) exports of goods 
B) capital inflows 
C) import of services 
D) unilateral transfers to U.S. citizens 
A) exports of goods 
B) capital inflows 
C) import of services 
D) unilateral transfers to U.S. citizens

Question 11

If a central bank wishes to raise the foreign-exchange value of its currency, it will

Accepted Answer

A) buy domestic currency and sell foreign assets. 
B) sell domestic currency and buy foreign assets. 
C) attempt to reduce domestic interest rates. 
D) attempt to raise the domestic price level relative to foreign price levels. 
A) buy domestic currency and sell foreign assets. 
B) sell domestic currency and buy foreign assets. 
C) attempt to reduce domestic interest rates. 
D) attempt to raise the domestic price level relative to foreign price levels.

Question 12

The main difference between a sterilized intervention and unsterilized intervention in the foreign exchange market is:

Accepted Answer

A) a sterilized intervention is coordinated with other nations 
B) an unsterilized intervention does not change the exchange rate 
C) an unsterilized intervention does not change the monetary base 
D) a sterilized intervention does not change the monetary base 
A) a sterilized intervention is coordinated with other nations 
B) an unsterilized intervention does not change the exchange rate 
C) an unsterilized intervention does not change the monetary base 
D) a sterilized intervention does not change the monetary base

Question 13

Which of the following was NOT considered to have been a drawback of the pre-1914 gold standard?

Accepted Answer

A) It sometimes led to inflation, which several times in the late nineteenth century caused recessions in the United States. 
B) Countries had little control over their domestic monetary policies. 
C) Countries with trade deficits experienced deflation. 
D) Changes in the world money supply were strongly influenced by gold discoveries. 
A) It sometimes led to inflation, which several times in the late nineteenth century caused recessions in the United States. 
B) Countries had little control over their domestic monetary policies. 
C) Countries with trade deficits experienced deflation. 
D) Changes in the world money supply were strongly influenced by gold discoveries.

Question 14

In the balance-of-payments accounts, the statistical discrepancy

Accepted Answer

A) equals the capital account balance minus the current account balance. 
B) equals the current account balance minus the capital account balance. 
C) probably reflects hidden capital flows. 
D) must equal zero. 
A) equals the capital account balance minus the current account balance. 
B) equals the current account balance minus the capital account balance. 
C) probably reflects hidden capital flows. 
D) must equal zero.

Question 15

The promise that was to hold the Bretton Woods system together was the agreement that

Accepted Answer

A) no industrial country would allow high rates of inflation. 
B) foreign central banks would be able to convert U.S. dollars into gold at a fixed price. 
C) no country would raise tariffs on the products of other countries. 
D) all countries would be willing to redeem their paper currencies for gold. 
A) no industrial country would allow high rates of inflation. 
B) foreign central banks would be able to convert U.S. dollars into gold at a fixed price. 
C) no country would raise tariffs on the products of other countries. 
D) all countries would be willing to redeem their paper currencies for gold.

Question 16

If the Fed wants to increase the value of the dollar, it will

Accepted Answer

A) sell foreign securities and buy dollars in international currency markets. 
B) buy foreign securities and sell dollars in international currency markets. 
C) buy foreign securities and also buy dollars in international currency markets. 
D) sell foreign securities and also sell dollars in international currency markets. 
A) sell foreign securities and buy dollars in international currency markets. 
B) buy foreign securities and sell dollars in international currency markets. 
C) buy foreign securities and also buy dollars in international currency markets. 
D) sell foreign securities and also sell dollars in international currency markets.

Question 17

Discuss the problems associated with the imposition of capital controls.

Accepted Answer

First, with capital controls, domestic f

Question 18

When the Fed allows the monetary base to respond to the purchase or sale of domestic currency in the foreign exchange market, the process is called

Accepted Answer

A) open market operations. 
B) hedging. 
C) sterilized intervention. 
D) unsterilized intervention. 
A) open market operations. 
B) hedging. 
C) sterilized intervention. 
D) unsterilized intervention.

Question 19

The speculative attack on the British pound in 1967 succeeded because

Accepted Answer

A) the pound was seriously undervalued relative to the dollar. 
B) Britain decided to drop out of the Bretton Woods system. 
C) British exports greatly exceeded British imports, causing a large inflow of gold. 
D) the Bank of England lacked the international reserves to defend the existing exchange rate indefinitely. 
A) the pound was seriously undervalued relative to the dollar. 
B) Britain decided to drop out of the Bretton Woods system. 
C) British exports greatly exceeded British imports, causing a large inflow of gold. 
D) the Bank of England lacked the international reserves to defend the existing exchange rate indefinitely.

Question 20

The current account balance plus the financial account balance

Accepted Answer

A) equals the trade balance. 
B) equals the net outflow of currency from the domestic economy. 
C) will be negative during economic expansions and positive during economic contractions. 
D) equals zero. 
A) equals the trade balance. 
B) equals the net outflow of currency from the domestic economy. 
C) will be negative during economic expansions and positive during economic contractions. 
D) equals zero.

If the central bank buys foreign assets,

Currently, the dominant reserve currency is the

The fixed exchange rates of the Bretton Woods system were maintained

If the U.S. current account balance is negative,

Capital inflow restrictions

The euro is

Which of the following is NOT considered a payment in the balance of payments?

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

If the Fed buys $2 billion of short-term securities issued by the government of Japan and pays for them by writing a check for $2 billion,

Which of the following is NOT considered a receipt in the balance of payments?

If a central bank wishes to raise the foreign-exchange value of its currency, it will

The main difference between a sterilized intervention and unsterilized intervention in the foreign exchange market is:

Which of the following was NOT considered to have been a drawback of the pre-1914 gold standard?

In the balance-of-payments accounts, the statistical discrepancy

The promise that was to hold the Bretton Woods system together was the agreement that

If the Fed wants to increase the value of the dollar, it will

Discuss the problems associated with the imposition of capital controls.

When the Fed allows the monetary base to respond to the purchase or sale of domestic currency in the foreign exchange market, the process is called

The speculative attack on the British pound in 1967 succeeded because

The current account balance plus the financial account balance

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters

Exam 16: The International Financial System and Monetary Policy

If the central bank buys foreign assets,

Currently, the dominant reserve currency is the

The fixed exchange rates of the Bretton Woods system were maintained

If the U.S. current account balance is negative,

Capital inflow restrictions

The euro is

Which of the following is NOT considered a payment in the balance of payments?

Which of the following will NOT result from an unsterilized intervention in which the central bank sells foreign assets to purchase domestic currency?

If the Fed buys $2 billion of short-term securities issued by the government of Japan and pays for them by writing a check for $2 billion,

Which of the following is NOT considered a receipt in the balance of payments?

If a central bank wishes to raise the foreign-exchange value of its currency, it will

The main difference between a sterilized intervention and unsterilized intervention in the foreign exchange market is:

Which of the following was NOT considered to have been a drawback of the pre-1914 gold standard?

In the balance-of-payments accounts, the statistical discrepancy

The promise that was to hold the Bretton Woods system together was the agreement that

If the Fed wants to increase the value of the dollar, it will

Discuss the problems associated with the imposition of capital controls.

When the Fed allows the monetary base to respond to the purchase or sale of domestic currency in the foreign exchange market, the process is called

The speculative attack on the British pound in 1967 succeeded because

The current account balance plus the financial account balance

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters